Tag Archives: Making Tax Digital

Firstly, I recommend that your Accountant signs you up, we will sign up our clients who are above the threshold to avoid potential problems.

Many businesses have found the process confusing because

• They were in the Pilot
• They didn’t realise they needed to register
• They thought the software would do the registration

The best time to register is after you have filed your last pre-MTD VAT return and made payment or had a refund and at least 7 days before the end of the next VAT period.

The reason why this is important is that HMRC need time to switch businesses from old gateway to the new MTD system.

We have had spoken to businesses who registered at the wrong time and found that they either can’t submit returns or Direct Debits or repayments have been delayed causing significant cash flow problems particularly for businesses expecting six figure refunds.

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For businesses over the VAT registration threshold, Making Tax Digital starts in April 2019. This represents the first phase of the UK Government’s plan to become one of the world’s most digitally advanced tax administrations. However, many people are still not fully aware of the impact it will have on their business and the various software solutions which need to be considered.

It is vital that all businesses understand the imminent changes and what further developments we can expect in the future. This essential course will guide you through everything you need to know about Making Tax Digital and what procedural changes you need to put in place to ensure you are compliant with the new requirements.

It will cover the following key areas…
# What is Making Tax Digital for VAT?
# When does it start?
# VAT notice 700/22
# Exemptions
# Deferred reporting
# Software solutions
# New penalties
# The soft landing
# The next phase 2021: Income Tax and Corporation Tax

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Last week it was announced that due to Brexit some of HMRC’s plans have had to be put on hold, so they have decided that Digital Services for Individuals would be put on hold.

HMRC’s email stated: ‘We have made the decision to delay plans to introduce further digital services for individuals, to release project capability to EU Exit work. This means halting progress on simple assessment and real time tax code changes.’
‘We will pause work to digitise services that impact fewer numbers of customers, such as those paying Inheritance Tax, or applying for Tax Advantaged Venture Capital Schemes and PAYE settlement agreements.’

But Making Tax Digital for Businesses will not be delayed, so from 2019 VAT will be the first stage then Business Tax potentially starting in 2020.

April 2018 – quarterly reporting for income tax purposes for unincorporated businesses with a turnover over £85,000

April 2019 – quarterly reporting for both incorporated and unincorporated businesses for income tax and VAT

April 2020 – quarterly reporting for corporation tax purposes

The new timetable will be

Only VAT registered businesses will need to keep digital records and only for VAT purposes.

They will only need to do so from April 2019.

Businesses will not be asked to keep digital records or update HMRC quarterly for other taxes until at least April 2020 (the original dates had implementation from April 2019).

If you are VAT registered then you will need to move to digital record keeping (i.e. use software to record all your VAT invoices and receipts).

This is massive change in timetable and one that many small businesses and landlords will welcome.

Whilst this now gives smaller businesses longer to prepare, MTDfB is still coming in 2020 and expected to require unincorporated businesses to report the information noted below, so its still worth starting preparations and using cloud based accounting systems.

Once the election is over, Making Tax Digital will be pushed forward again, ready for its launch in April 2018.

If you aren’t using any software or apps to prepare your accounts, now is the time to start. Under MTDfB – Making Tax Digital for Business – Sole Trader, Partnerships, Landlords and ultimately Companies will need to file returns every quarter and submit a final year end return.

This what you will need to report

The categories of information listed below are being reviewed and have not yet been finalised. They have been included mainly for indicative purposes.

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Whilst we know that due to the election Making Tax Digital was dropped from the Finance Bill, we also know HMRC has said it will be back as soon as the elections are over!

The plan is that by 2019 VAT returns will be abolished for businesses including the Self Employed, Landlords and Partnerships.

But don’t start celebration too soon, they are being abolished because we will be providing more information each quarter online to HMRC.

Interestingly HMRC say they may be able to accept spreadsheets if they meet specific criteria, but realistically, surely everyone should now be using online accounting software. DIY spreadsheets are not the best way to keep your accounts and there is a high risk of error.

Why create your own spreadsheet when you can get software like Sage One Start for £6/mth or you might get an even better deal if you ask a Sage One Accountant.

So what is the expected timetable for Making Tax Digital

April 2018 – quarterly reporting for income tax purposes for unincorporated businesses with a turnover over £85,000

April 2019 – quarterly reporting for both incorporated and unincorporated businesses for income tax and VAT

April 2020 – quarterly reporting for corporation tax purposes

2018 is just the beginning as Sage explain …

What Making Tax Digital really means

All self-employed individuals, landlords and incorporated entities with business income over £10,000 will be required to keep digital records of all their income and expenditure and submit these records electronically to HMRC. Those in employment who have secondary income of more than £10,000 per year through self-employment or property will also be affected.

HMRC will not provide you with the tools for digital record keeping and submission. These will be offered through commercial software providers.

Those affected have the option to make the electronic submission in collaboration with their accountant or bookkeeper or can do this on their own.

Updates to HMRC will need to be made at least quarterly, taxpayers will have an option to pay tax based on their quarterly submissions, if they wish.

Any activity at the end of the year must be concluded and sent either by ten months after the last day of the accounting period, or by 31st January, whichever is sooner.

It will will eventually affect us all, businesses including property investors will have to initially file their accounts quarterly and then ultimately monthly.

For many this will be a huge shift from annual accounts and self assessment returns.

HMRC will be able to estimate your tax each time you submit a return.

The government have confirmed that taxpayers will be given a period of at least 12 months before they will be charged any late submission penalties in relation to their Making Tax Digital for Business obligations.

HM Revenue and Customs’ (HMRC) ambition for most businesses to keep records digitally and send quarterly summary updates moves a step closer with the launch of the Making Tax Digital for Business (MTDfB) pilot.

In April, HMRC will invite some customers, both businesses and their agents to sign up for a new way to report income and expenses online. At different stages of the pilot customers will help HMRC develop and improve the new service by:

using accounting software to record their business income and expenses

sending summary reports of their income and expenses direct from their digital records quarterly or more often if they choose

signing up to go paperless

Based on the information they report, customers will get an estimated tax calculation.

As soon as the new service has been tested with the first group of businesses and agents, other customers will be able to join the pilot. These customers will be able to report their income and expenses for the quarter they join as well as any previous quarters.

Customers who aren’t invited to take part in the pilot at the beginning won’t be able to start sending quarterly reports to HMRC immediately, but they can:

start to use accounting software to keep their records if they don’t already

check with their software supplier, or agent, that any software they use is compatible with quarterly reporting